Retirement planning is no small task. As life spans increase, you may have to add caring for your aging parents to your own list of retirement concerns.
There’s a potential retirement crisis in the offing and it’s not necessarily your own. As you map out your plans for financial security in an uncertain future, you should also be thinking about caring for aging parents.
Why? Because people are living longer—and it’s surprising even them.
According to the Social Security Administration (SSA), men who reach 65 today can expect to live, on average, to age 84.3. Bump that even higher for women, who can expect to live until, on average, age 86.7. And, as the SSA reminds us, those are just the averages—one out of every four 65-year-olds today will live past age 90, and one out of 10 will reach 95 or older. Living longer can mean added health care and long-term care costs, including sometimes-pricey in-home services or perhaps nursing home costs, that may stretch an entire family’s savings.
In other words, there’s a growing need for income that is guaranteed to last a person’s entire life, as many people are living longer and are concerned about outliving their assets. While there are a number of alternatives regarding how to handle long-term care expenses, here are two:
Many Gen Xers and the Ys right behind them already know these longevity statistics and are factoring them into retirement planning. Younger Boomers, too. Their parents, however, didn’t necessarily count on living this long, and many of them are ill-prepared. According to a 2018 study by the National Bureau of Economic Research, a mere 10% of the elderly have long-term care insurance. Are your parents among them?
They may be able to subsist on Social Security and/or a nice pension with some supplementary income through dividends or withdrawals from Individual Retirement Accounts (IRAs). But what happens when Alzheimer’s, mobility issues, or some other health curveball barrels in? What happens if the value of a home or an investment portfolio goes south just when those assets are needed most? That’s when the real financial pain begins. Caring for elderly parents can be very, very expensive.
Let’s look at the hard, cold facts about long-term care: It can eat up all your assets in no time at all.
Like real estate, the prices depend on location, location, location. The costs for similar care can vary greatly from one region to another, according to research by Genworth, the largest seller of long-term care insurance. This can mean large differences in the regional cost of insurance.
In Chicago, the average cost of a home health aide will set you back $24 an hour, according to the 2018 Genworth Cost of Care Survey. Just one year of that and the total bill rings up quickly to about $37,000—and that’s for only six hours per visit, five days a week. Someone else has to stand in the rest of the time.
It’s a little cheaper in Richmond, VA, where the per-hour price is $20, or a shade above $31,000 a year.
If Pop were put in a nursing home in Chicago, the average per-day price tag is $241, or about $88,000 a year. In Richmond, it’s pricier per day in a nursing home, at $260, or about $95,000 over the same period.
Let’s take it to Seattle, where the per-hour cost for in-home care comes in at a whopping $31.95 an hour, or $50,000 a year. And if a nursing home is needed, the prices spiral to $304 daily, or $111,000 a year.
Not all families can afford the prices in this small sample. Medicare doesn’t cover hospital or nursing home stays over 100 days, so don’t count on that. And Medicaid is available only if your assets are next to nothing.
Keep in mind that the best family time may be spent asking some tough questions about multi-generational retirement planning, including meeting nursing home costs and other long-term care expenses. It’s never too early to have the long-term care talk.
After all, a birthday cake crowded with candles is a good thing; financial surprises in our golden years are not.
TD Ameritrade does not provide legal or tax advice. We suggest you consult with a qualified legal or tax-planning professional with regard to your personal circumstances.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
Annuities are long-term investments designed for retirement purposes. Withdrawals of taxable amounts are subject to income tax and, if taken prior to age 59½, a 10% federal tax penalty may apply. Early withdrawals may be subject to withdrawal charges. Optional riders are available at an additional cost. All guarantees are based on the claims paying ability of the insurer. An annuity is a tax-deferred investment. Holding an annuity in an IRA or other qualified account offers no additional tax benefit. Therefore, an annuity should be used to fund an IRA or qualified plan for annuity features other than tax deferral. Product features and availability vary by state. Restrictions and limitations may apply.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2022 Charles Schwab & Co. Inc. All rights reserved.